Sebi mulls mandating digital assurance of financial statements for top listed firms

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New Delhi, Feb 3 (PTI) Markets regulator Sebi on Monday proposed mandating digital assurances of financial statements of top-100 listed firms, which will help auditors count on external information sources during the audit.

In its consultation paper, Sebi said the digital assurance report will "increase transparency, improve disclosure standards and enable better enforcement, and thereby provide greater investor protection and trust in the ecosystem".

The report should be prepared by an auditor who has subjected himself/herself to the peer review process of the Institute of Chartered Accountants of India (ICAI) and holds a valid certificate issued by it.

Sebi suggested that the reporting on digital assurance be applicable on top-100 listed entities by market capitalisation from the 2024-25 financial year onwards.

Earlier, ICAI brought out a technical guide on digital assurance to provide guidance to its members to adopt enhanced use of technology in audit by implementing the use of digitally available audit evidence and information.

The technical guide primarily focuses on sources of external audit evidence and information available and how the same can be utilised by the members in their audit procedures.

It is noted that the technical guide in itself does not require any separate reporting by auditors on these aspects. Further, no responsibility is cast on the management of listed entities to provide this information obtained from external data repositories to auditors or provide access to such information to auditors.

Following the technical guide by ICAI, Sebi held consultations with members of the Primary Market Advisory Committee (PMAC) to deliberate on the requirement of a separate report on digital assurance of financial statements issued by listed companies.

"As a continuous endeavour to enhance the quality of financial reporting being done by listed companies and in order to provide greater investor protection, it is proposed to mandate a separate report on digital assurance of financial statements," Sebi said.

The listed entity should submit a management statement and auditor's report on digital assurance to stock exchanges by July 31, this year for FY25 and thereafter by July 31 for the relevant financial year. Further, any delay in compliance with the timelines will attract fines.

The Securities and Exchange Board of India (Sebi) has sought public comments on the proposal by February 24. PTI SP TRB